Are contractors entitled to a pension?

Pensions can be confusing for those not in standard employment. This is the case for contractors. Even though they are familiar with managing their own money, there are still certain financial aspects that are unclear. One such aspect is if they are entitled to a pension.

If you’re a contractor and wondering where you stand, this guide is here to help.

Are contractors entitled to a pension?

Everyone that makes National Insurance contributions over a set number of years is entitled to a State Pension – contractors included. However, the situation is different when it comes to a work-based or occupational pension. This is something you often have to take the initiative with and organise yourself.

Pensions for contractors are typically private. It is generally the same situation as self-employed pensions, where you make direct contributions to your defined pension pot. Unlike with a work-based pension, you do not enjoy the benefit of pension contributions from your employer. This is why it is highly recommended to start as early as possible when saving for your pension.

Pension Tax Relief for Contractors

With that said, it’s not all bad news. In fact, with a private pension, you can enjoy tax relief on contributions you make. If you are a basic rate taxpayer as a contractor, for instance, the relief will add an extra 20% to your eligible pension contributions. A private pension also supplies you with added control and flexibility.

How contractors can consolidate their pensions

In certain situations, a contractor can have a pension set up through an umbrella company. They could also have pension pots from previous employment roles. Yet having these pensions all separate is no good. Some can become lost, and managing all of these separately can be time-consuming and confusing.

This is where pension consolidation can be advantageous.

If you do combine your pensions, this helps in numerous ways for contractors and others that need to manage their own private pension. By having your pension in one single pot, it is much easier to know exactly where you stand with your savings and what your future is looking like. You only have to look in one place to get all the information you need. Furthermore, you can take greater control over investments and how to manage your pension pot.

How iSIPP can help contractors with pensions

Whether you are setting up a private pension for the first time or want to consolidate your current pension pots, the task is made much easier with iSIPP.

At iSIPP, we are specialists in pension consolidation, ensuring contractors can place all of their existing pensions into a single account. Not only that, but we make it as straightforward as possible to manage this account with a simple to use online platform.

With iSIPP on your side, you can don’t no longer need to wonder if contractors are entitled to a pension. We can get you up and running, supplying you with a platform that makes it easy for contractors – and anyone else – to do everything, from making contributions to managing investments.

Conclusion

Even if it’s some time away yet, you need to prepare for retirement. This is particularly the case when you’re a contractor and managing your own finances.

The State Pension is unlikely to be enough for you to live comfortably during those later years. Plus, while you might think it is easier to simply save up money in your bank account for the future, there are added financial benefits gained from saving into a pension pot, including interest and government contributions.

With iSIPP, you can easily manage your pension for the present and future. This includes picking investment opportunities, making contributoins, combining pension pots, and more.

You might also like:

Pensions for contractors

Pension tax relief for self-employed and contractors

Pensions for the self-employed

Disclaimer 

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

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